A Look Into the Markets
This past week, interest rates edged higher as financial markets brace for a critical week ahead. Let’s dive into what’s been happening and preview what’s to come.
“Everybody’s looking for something” – Sweet Dreams by the Eurythmics
Tariff Uncertainty
Financial markets are still grappling with the uncertainty surrounding U.S. tariffs on foreign goods. The big questions: which countries and products will be targeted, what the tariff rates will be, and how it will ultimately affect the U.S. economy and inflation. Last week, Fed Chair Jerome Powell referred to the inflationary effects of tariffs as “transitory.” That term raised some eyebrows, given how it was previously used to describe the persistent inflation we saw in 2021 and 2022. But we should get more clarity soon, with tariffs expected to take effect on April 2nd, impacting a range of countries and products.
Stocks and Bonds: A Shifting Dynamic
Historically, falling stock prices were tied to declining interest rates. Recently, that relationship has shifted. Even with a sharp stock market sell-off in recent weeks, the bond market hasn’t rallied as expected, leaving many hoping for lower rates disappointed. This past week, stocks seemed to stabilize, but bond prices continued to drop, pushing yields higher.
Debt: A Global Headwind
Government debt, both here and abroad, remains a major hurdle for rates to improve meaningfully. Domestically, the U.S. Treasury sold billions in short-term bonds this week, but the auction’s lukewarm reception didn’t do much to ease rates. Meanwhile, across the pond, bond yields in the UK and Germany spiked as markets worried about new fiscal spending packages. These rising global yields are putting upward pressure on rates here in the U.S.
Mortgage Applications Surge
Even with a modest rate uptick this week, 30-year mortgage rates have been steadily declining since mid-January, when they topped 7%. This drop in rates triggered a sharp increase in mortgage applications, both for purchases and refinances. One major bank reported an 80% jump in applications from January to March as consumers seized the opportunity to lock in lower rates.
30-Year Mortgage Rates
As of March 27, 2025, the 30-year fixed mortgage rate averaged 6.65%, slightly down from the previous week’s average of 6.67%.
The 4.20% Barrier
The 10-year Treasury Note, a key driver of mortgage rates, has struggled to break below its 4.20% yield support level. That barrier held firm, and the yield has since climbed to 4.35%. For mortgage rates to drop significantly, we’ll need to see the 10-year yield consistently close below 4.20% for multiple days.
Bottom Line
After improving from mid-January to mid-March, interest rates have ticked up slightly in the face of ongoing uncertainty. Any further declines in rates may depend on tariff clarity and the Fed’s decision to pause Quantitative Tightening next week.
Looking Ahead
Next week is shaping up to be a pivotal one for the markets. Key economic data, such as the JOLTS report (which tracks job openings, hires, and quit rates), will offer insight into labor market trends. On April 1st, the Fed is expected to pause its balance sheet reduction, halting Treasury sales, which could trigger purchases of Treasuries or mortgage-backed securities. Then, on April 2nd, U.S. tariffs will take effect globally, although details on targets, products, and rates remain unclear—along with how the market will react.
Mortgage Market Guide Candlestick Chart
For homebuyers and refinancers, mortgage rates are a critical metric, and they’re closely tied to mortgage bond prices. The chart below shows a one-year view of the Fannie Mae 30-year 5.5% coupon. The rule is simple: rising bond prices mean falling mortgage rates; falling prices mean rising rates. Recently, prices pulled back from resistance at $100 as the 10-year Treasury yield climbed above 4.20%.
Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, March 28, 2025)
Economic Calendar for the Week of Week of March 31 – April 4
